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Pioneer Press faces unknown owner

When the sale is complete, Sacramento-based McClatchy will take Knight Ridder's spot as the country's No. 2 newspaper publishing company.

The number of daily newspapers it runs will jump from 12 to 32, once it unloads the 12 it doesn't want. McClatchy's ambitious acquisition represents a major shift in the national media landscape.

Knight RidderPhoto by Justin Sullivan/Getty Images

In Minnesota, though, the focus is mostly on those properties to be cast off. McClatchy is selling the lower performers among Knight Ridder's holdings.

At the 20 papers McClatchy is keeping, readership is expected to grow more than 11 percent in the next five years. At the 12 they are spinning off, including the Pioneer Press, Duluth News Tribue, and Grand Forks Herald, growth is projected to average less than 5 percent.

On a conference call with reporters, McClatchy CEO Gary Pruitt said the papers being sold "do not fit" the company's "strategy."

"We know we will be asked whether our decision to sell them means we think they're destined to fail. Our firm answer is, 'No, we do not,'" said Pruitt. "We are building McClatchy into the company we know how to run best. And other companies can and certainly will do the same for the 12 papers to be sold."

Pruitt countered rumors that McClatchy already has buyers in place for many of those papers. He did say there have been multiple inquiries.

"We're beginning to market those papers immediately. And we plan to move with alacrity in selling them. We hope to sell at least some of them simultaneously with the closing of this deal," said Pruit.

The sale of Knight Ridder to McClatchy is expected to close this summer.

Our hope, really, I think is a private investor. A family, a person who thinks the Twin Cities deserves a second daily newspaper voice in journalism.

Aron Kahn, Pioneer Press reporter

According to McClatchy, the spinoff of the St. Paul Pioneer Press, Minnesota's oldest newspaper, is not primarily based on performance. Because McClatchy owns the Star Tribune, the company concluded federal antitrust laws would make it impossible to acquire its rival across the river.

The news that someone other than McClatchy will buy the Pioneer Press has not quashed speculation the Pioneer Press may shrink or even close.

By one argument, McClatchy has little reason to sell the St. Paul paper to anyone who will present stiff competition to the Star Tribune, currently McClatchy's biggest paper.

"The disappearance of the Pioneer Press would make a huge growth spurt for the Star Tribune," says veteran Pioneer Press reporter Aron Kahn.

Kahn says he and many of his colleagues remain skeptical that McClatchy has any interest in seeing the Pioneer Press succeed.

"We're concerned that we would just be used as a liquidation vehicle, to make some money for a corporation, or reduce the expenses of another corporation -- and that journalism is really disregarded in the process," says Kahn.

Short of closure, Kahn fears the paper may go to a buyer more interested in cutting costs than providing journalism that creates a serious competitor to the Star Tribune.

The Pioneer Press' 10 percent profit margin is strong compared with many other businesses, but not next to many newspapers.

A spokeswoman for McClatchy says the company's intentions are benign, and deliberately undermining the Pioneer Press would be counter to "the McClatchy way." McClatchy, she says, believes competition is healthy for news organizations.

Such a tactic has been tried before, according to Linda Foley, president of the Newspaper Guild -- which represents about half the workers at the Pioneer Press. Foley cites an attempt five years ago in Honolulu, which was ultimately thwarted by community and legal action.

"We certainly are going to be watching for that kind of thing," says Foley. "The Twin Cities has supported two newspapers for a long, long time. They serve different constituencies, different cities, they both have a value they bring to the market."

Foley and the Newspaper Guild hope they'll be the ones to buy the Pioneer Press -- and a number of other unionized papers McClatchy is spinning off. The Guild says it has found a California billionaire venture capitalist willing to purchase eight of those papers, including those in St. Paul, Duluth and Grand Forks.

Foley says the so-called "worker-friendly buyout" would give employees substantial ownership of the papers and a high level of control in managing them.

"Part of what's driving us to do this is, we do think that in all of this corporate shuffleboard that's been going on with these companies, we think that journalistic values have been lost, community values have been lost," Foley says. "We think those are values that are very important to the business success of newspapers, and all to often those have been forgotten."

The union-backed bid has some skeptics, including Larry Grimes, president of W.B. Grimes and Company, which structures financial deals in the newspaper industry. Grimes says he wonders whether the worker-friendly company could generate enough return for its shareholders.

Despite McClatchy's statements to the contrary, Grimes believes other, much larger players may have already staked their claims to the papers McClatchy doesn't want.

"I'm curious as to whether there are buyers already lined up for those papers, and whether there's a lot of behind-the-scenes work being done on behalf of perhaps Gannett and MediaNews Group to pick off the papers they really wanted from this group," says Grimes.

Gannett, the nation's largest newspaper publisher, surprised many analysts by failing to make a bid for all of Knight Ridder. It could make a play for the papers in Duluth or Grand Forks. The newspaper in St. Paul would be off-limits, because Gannett already owns a TV station in the same market -- NBC-affiliate KARE 11.

That leaves the lesser-known MediaNews Group as the other likely contender for the Pioneer Press. MediaNews Group, the nation's seventh-largest newspaper company, did not reply to a request to discuss its interest in the Pioneer Press. Its controversial CEO, Dean Singleton, was out of the office.

Singleton reportedly visited the Pioneer Press two weeks ago on a fact-finding trip. Scott Sherman, a writer for The Nation magazine, wrote a profile of Singleton three years ago for the Columbia Journalism Review. Sherman says at the 40 papers MediaNews owns, the CEO has developed a number of nicknames -- most prominent of which is "Lean Dean."

"Those are names used by reporters in newsrooms, and they're largely right. He comes in, cuts budgets and cuts jobs," says Sherman. "From time to time he will pump money into a newsroom. But that tends to be, by and large, in an effort to get the paper up to a point where it is making money."

Singleton has tended to buy papers on the cheap, when they were in trouble. In Sherman's profile, Singleton likens himself to a heart surgeon -- some patients are too sick be saved; others recover to live a stable life. The Pioneer Press, as a paper in decent shape already, would be a break from his pattern.

Though his reputation as "Lean Dean" is well established, Sherman says Singleton may be a character in transition. He has publicly expressed some regret about his reputation as a cost-slasher.

Importantly, Sherman believes Singleton has grown more serious about his legacy -- and about journalism -- as his multiple sclerosis has progressed.

"A few years ago he purchased the Denver Post, which he wants to be the jewel in his crown. And in fact he's done OK with it as far as I can tell," says Sherman. "But for the most part, money and profit are his primary motivation."

Singleton and MediaNews Group have remained silent about their interest in any Knight Ridder properties.

In the meantime, reporters like Aron Kahn of the Pioneer Press are hoping this might be an opening for an older model of newspapering -- one that seems a little nostalgic given the Wall Street pressures that have put the paper in its current situation.

"Our hope, really, I think is a private investor. A family, a person who thinks the Twin Cities deserves a second daily newspaper voice in journalism -- who understands that we do make a very good profit," says Kahn.

McClatchy, the nation's new newspaper giant, says only that it hopes to move quickly to sell the papers, and minimize uncertainty for Kahn and other employees caught up in the changes in ownership.